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Organization Size, Life Cycle, and Decline

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Sherry Cao

on 11 March 2014

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Transcript of Organization Size, Life Cycle, and Decline

Organization Size
Organization Life Cycle
Organizational Bureaucracy and Control
Organizational Decline and Downsizing
· Every organization goes through periods of temporary decline
· Natural part of the life cycle
· Continual growth and expansion may not be possible
Chapter 9
Organization Size, Life Cycle, and Decline

Agenda
Dilemmas of Large Size

The advantages that small organizations have help them succeed and grow. However, once mature, it can be difficult for them to respond to the environment quickly with flexibility.
Big-Organization/Small-Organization Hybrid

Combines a large corporation’s resources and reach with a small company’s simplicity and flexibility.
Small Giants

Small Giants: Companies that focus on getting better, not bigger.

Shared Characteristics:
1) built the kind of business they wanted to live in rather than becoming shaped by outside forces.
2) intimately connected with the community in which it does business.
3) have a passion for the business, and a deep emotional commitment to the business and its employees, customers, and suppliers.

For managers, resisting pressure to grow takes strength of character.


Organizations are born, grow older, and eventually die
They follow predictable patterns through stages in the life cycle
Business Biology
Stages of Life-Cycle
Development
1. Entrepreneurial
2. Collectivity stage
3. Formalization stage
4. Elaboration stage
Sherry (Yingqi) Cao,
Jordan Roy Cash
Collins Baffour Eshun

BUSI 5338 Organization Design & Analysis
March 11, 2014


Rules & Procedures enable organizational activities to be performed in a predictable and routine manner.
Even though Bureaucracy is highly criticized in present day, when Max Weber came up with this idea, the rationale was to provide an alternative to organization forms based on favoritism, social status, nepotism, and graft.
Specialized duties are meant to give every employee a clear task to perform.
Hierarchy of authority provides a sensible mechanism for supervision and control.
Technical competence serves as the basis for hiring.
The separation of position from position holder means that individuals do not have the inherent right to do the job.
Written records and communication provide an organizational memory and continuity overtime.
How Size Affects
Organizational Structure and Control
Should an organization become more bureaucratic as it grows larger?

In what size are bureaucratic characteristics most appropriate?

Studies have attempted to answer these questions, most of which indicate that large organizations are different from small organizations along several dimensions of bureaucratic structure, including
formalization, centralization,
and

personnel ratios.
Formalization
Centralization
Personnel Ratios
A condition in which substantial, absolute decrease in an organization’s resource base occurs over a period.
3 Causes
1. Organizational
Atrophy
Grow older and inefficient
Overly bureaucratic
Ability to adapt to environment deteriorates
Follows a long period of success
Organization is attached to the practices and structures that brought them success
Failure to adapt
Warning Signs: excess administrative and support staff, bureaucracy, lack of effective communication

Solution: Streamline systems in order to increase flexibility
2. Vulnerability
Reflects an organization’s strategic inability to prosper in its environment
Pertains to small businesses that are not yet fully established
Vulnerable to shifts in consumer tastes
Before strong roots are set in the market, there is an industry shift

Solution: Redefine environmental domain to enter new industries or markets
3. Environmental
Decline
or Competition
Reduced energy and resources available to support an organization
New competition increases the challenge
Scarce resources and fierce competition

Solution: Scale down operations or shift to another domain
Stages of Decline
1. Blinded Stage
2. Inaction Stage
3. Faulty Action Stage
4. Crisis
5. Dissolution
Downsizing
Implementation
Downsizing: individuals are laid off permanently or not replaced when they retire.

Currently becoming popular in today’s organizations

Causes: reengineering projects, mergers and acquisitions, global competition, and the trend toward outsourcing have all led to job reductions

Question:
Why should downsizing be a last resort? How can downsizing harm an organization?
Techniques to
Smooth Downsizing
1. Communicate More
2. Provide Assistance for Displaced Workers
3. Help the Survivors Thrive
Definition of Organizational Decline
Pressures For Growth?
Bureaucracy
in a Changing World
Organization Control Strategies
84% of organizations that make it past the first year still fail within 5 years because they can’t make the transition from the entrepreneurial stage. Pg 327.
Organizational Characteristics:
Stage by Stage
Formalization refers to rules, procedures, and written documentation such as policy manuals and job descriptions.
Centralization refers to the level of hierarchy with authority to make decisions.

In a decentralized setting, decisions are made at the lower level.
Bureaucracy relates to personnel ratios for administrative, clerical, and professional support life.
Bureaucratic systems that worked in the industrial age no longer work in the computer age as organizations are faced with new challenges.
Governments have been blamed for being overly bureaucratic. Lessons from the 9/11 attacks, space shuttle disaster, and 2004 Tsumani have encouraged governments to change their approach towards bureaucracy. There is a new trend in bureaucracy.


"Every time you add one layer of bureaucracy, you delay the movement of information up the chain of command"
Organizing Temporary Systems for Flexibility and Innovation
Example:
Incident Command System (ICS): Commonly used by police, fire department, and other emergency management agencies.


Cutting layers of the hierarchy
Keeping headquarters staff small
Giving lower-level workers greater freedom to make decisions rather than burdening them with excessive rules and regulations.



Another attack on bureaucracy is from the increasing professionalism of employees.
Do you agree?
3 Types of Organizational Control Strategies:
1. Bureaucratic Control
2. Market Control
3. Clan Control
Organization Size
Organization Life Cycle
Organization Bureaucracy and Control
Bureaucracy in a Changing World
Organization Control Strategies
Organization Decline and Downsizing
Rational-legal authority:
is based on employees' belief in legality of rules and the right of those in higher positions to issue command.
Traditional authority:
is the belief in traditions and the legitimacy of the status of people in authority.
Charismatic authority:
is based on the devotion to an exemplary or heroic character or individual.
W.W.J.D
Hill, C.W. Strategic Managment Theory pg. 65
Organization Life Cycle
Entry into each stage is challenging because companies are embarking on
new goals
in a
new arena
and adapting is not easy.

Along with each stage transition is a corresponding ‘crisis’
Other Approaches to Reducing Bureaucracy
Requirements
Type
Weber identified 3 types of authority:
Discussion
Discussion
Does your supervisor demand your respect or commands it?
References
McKenzie, R.B. Microeconomics for MBAs: The Economic Way of Thinking for Mangers. pg. 270.
1. McKenzie, R.B. Microeconomics for MBAs: The Economic Way of Thinking for Mangers. pg. 270.
2. Hill, C.W. Strategic Managment Theory pg. 65.
3. Bo Burlinghm. (2007) Small Giant: Companies that choose to be great instead of big.
the END.
Thank you!
Bo Burlinghm. (2007) Small Giant: Companies that choose to be great instead of big.
More examples?
Full transcript